Compensation and Staffing News
APRIL 2019

In some email readers, you may need to click on continuation dots to read the entirety of each article.
Housing Allowance Preserved
In 2017, responding to a lawsuit brought by the Freedom From Religion Foundation (FFRF), a federal district judge in Wisconsin ruled that the clergy housing allowance represented an "unconstitutional preference for religion." At that point, the future of the housing allowance became uncertain in the states covered by the Seventh Circuit – Indiana, Illinois, and Wisconsin; many thought that it was in jeopardy nationwide.
 
But last month, in a unanimous decision, the U.S. Court of Appeals for the Seventh Circuit reversed the 2017 ruling, thus preserving this important tax benefit for ministers. You may be interested to know that the UUA participated in an Amicus brief submitted to the Court in support of the constitutionality of the housing allowance.

For more about the lawsuit, the Seventh Circuit decision, and potential future challenges, read Seventh Circuit: Clergy Housing Allowance Is Constitutional, from Church Law & Tax.
Is Your Minister an Employee? (Spoiler Alert: In All Likelihood, YES!)
A congregational minister may be full-time or part-time. Called or hired. Solo, lead, associate, or assistant. Regardless, they are an employee. While ministers who simply provide occasional pulpit supply can be classified as independent contractors (and issued a 1099), any minister with ongoing responsibilities is an employee and should receive a W-2, just like other staff.

Well, almost like other staff....

Here's an important difference: Ministers are treated as self-employed for the purposes of Social Security and Medicare. This means that you cannot remit FICA for the minister as you do for other employees. Instead, the minister pays self-employment taxes (SECA) when they do their own quarterly tax filings.* Your minister is only "self-employed" in this single regard; otherwise, they are an employee of your congregation.

As if this dual tax status weren't complicated enough, we have noticed two other sources of confusion:

  1. The minister has a "contract" – their ministerial agreement. Some of your other staff may have employment agreements, as well. Please don't let the fact that someone has a "contract" lead you to believe that they are an independent contractor.
  2. Your congregation may have what's known as a "contract ministry." (See the Transitional Ministry Handbook, page 48, for an overview of Contract Ministry.) Once again, the word "contract" notwithstanding, a contract minister is an employee, not an independent contractor.

Whether a worker is an employee or an independent contractor is a critical legal distinction. If you classify any worker as an independent contractor who should be an employee, you are denying them the opportunity to participate in employee benefit plans – and you could be cited for tax evasion, putting your tax-exempt status at risk. The resources on our Employee or Independent Contractor? page can help you classify your workers correctly.

*Because ministers pay the full 15.3% of salary (including housing) for Social Security/Medicare themselves, rather than splitting the amount with their employer, UUA Compensation Guidelines include a self-employment tax offset, or "in lieu of FICA," as part of the minister's compensation. For questions, contact Jan Gartner , Compensation and Staffing Practices Manager.
Interim Ministerial Agreement
Last fall, we posted an updated Recommended Ministerial Agreement for Full-time Solo/Lead Ministries. We are using it as a starting point for other ministerial agreements. We now have a model Interim Ministerial Agreement available. Stay tuned for other versions.

Our Ministerial Transitions page features a number of new (or freshly edited) documents, including the agreements above. The Settlement Handbook and the Transitional Ministry Handbook have both been revised recently. You'll also find search calendars and much more.
Compensation Worksheet
Are you getting ready to welcome a new minister or another staff member in the coming program year? As you budget for any new employee, be sure to include a sufficient amount for benefits.

See the Compensation Guidelines section of our Compensation Program page for a Compensation Worksheet; we've even included a video (and slides from the video) with tips and reminders about each benefit line item.

Your regional Compensation Consultant is available to answer questions.
UUA Office of Church Staff Finances
24 Farnsworth Street | Boston, MA 02210